A guide to writing the perfect investor update email (Template included)

Why is it important to send regular updates to your investors? 

In a word, trust. 

We all know trust can make or break business relationships, and regular investor updates are one of the best ways you can establish and build trust with investors. 

Why you need to regularly send investor update emails

Investor updates are important for several reasons. First of all, investors expect them. They have a lot of investments to track, so regular updates from you make that job a bit easier. 

Below are six more reasons why regular updates need to be a central piece of your investor engagement strategy for current and potential investors. 

1. Transparency 

Investors genuinely want you to be successful because your success promises outsized returns to their limited partners (LPs). Given their expertise and network, your investors will do everything in their power to help remove roadblocks if you're open and honest with them.  

But, for that to happen they first need a clear picture of what is happening in your business so they can identify different ways they can help.  

2. Fundraising

Follow-on funding is usually based on you hitting certain agreed-upon metrics with the money you’ve raised in one or more previous rounds. Your investors need updates to keep track of the core metrics and decide if they’re confident enough to provide additional funding in your next round.  

3. Access to your investors’ networks 

Investors can fast-track you to your goal with their connections. Be it hiring, fundraising, finding the right advisors, or help with issues in your business, your updates help them decide how best they can use their connections to get you to the desired outcomes.

4. Recruiting assistance 

If you're struggling to find a top-notch SaaS marketing generalist or your VP of Sales or Head of Engineering, you'll find it easier when you have the trust and support of your investors. They can help you recruit better people faster. Given their other portfolio companies, past connections and brand name, investors are like “talent magnets”.  

5. Connecting the dots 

Your investors have been there, done that, and seen it all. Given their experience with their portfolio companies, they can often see things about your business that you can’t – connections you may be missing or issues brewing. Your updates provide a basis for their observations, allowing them to provide guidance when needed.  

6. The opportunity to reflect and stay accountable

Regular updates to investors will help you stay accountable, encouraging you to routinely measure your financial and operational performance, reflect on your targets and KPIs, and course-correct wherever necessary.  

How often should you update investors?

The answer is, it depends on your needs. If you feel like you’ve got a pretty good  handle on things and business is running smoothly, a quarterly update should be your bare minimum. However, if you’re an early-stage startup or you think you’d benefit from more help from your investors, you’ll probably want to consider a monthly update. 

It’s also best to stick to the decided interval and not change it often. Missing it by a few days should be acceptable, but the importance of being consistent and sticking to the pre-decided timeline cannot be stressed enough. You do not want your investor asking for an update from you. 

As for the best time to send the update, we suggest mid-week. This is because Mondays are usually busy for investors who are most likely catching up on work from the previous week, and Fridays are “wind down” days for a lot of people. 

For a deeper dive into how to work with your investors, check out the conversation in the video below.

How to write an investor update email

In a nutshell, your investors want to know three things – how is the business doing, how long can it last given the current state of its finances, and finally, what can they do to help you succeed? 

Start with your hits and misses

After a brief intro, it's good to lead with your hits and misses to give your investors an "at-a-glance" look, which they'll especially appreciate if they don't have time at the moment to dive into the details.

Your "hits" are any big wins, like a notable logo you’ve closed, an important new hire, and any key milestones achieved. 

While we all love to share good news, it’s also important that you don't shy away from sharing the not-so-good news. This helps inventors get a fair picture of your business and can help them see where you might be struggling and how they can help. 

Transparency is key. 

It’s critical to address any financial or operational concerns promptly. And when you share your challenges, make sure to also share your strategies for overcoming them or ask your investors for help if you need it.  

Jason Lemkin of SaaStr has this to say about sharing bad news with investors, “Everyone that’s been around start-ups knows there are ups and downs. We expect it.  And investors especially expect it.”

Remember, you aren’t going to be the first one to give an investor bad news and neither will you be the last. It is simply the way of business. 

8 key metrics your investors will expect to see

The metrics investors will want to see depends in large part on where your company is in terms of its maturity. For example, if you're a very early stage startup with less than, say $3 million in ARR, you're likely more focused on hiring key talent, getting feedback from early adopters and rolling out those feature asks from them, building your pipeline, and setting up your processes. In this case, your updates would focus more around metrics that reflect your progress in those areas.

Here, we have listed eight key metrics that are important to investors in a SaaS company that has entered its growth stage. The first three are key performance indicators (KPIs) that will help your investors get a pulse on the overall health of the company, while the other five will help you keep your investors offer a closer, more current view. 

1. Annual recurring revenue trend over the last 5 quarters

Most SaaS companies use Annual Recurring Revenue (ARR) today as a core KPI. As SaaS pricing models have changed in recent years, ARR has become the most common metrics used in the industry today.  

Investors depend on ARR trends to gauge the long-term potential and growth trajectory of the SaaS business.

By tracking ARR over five quarters, investors can understand your efforts to acquire new customers while retaining your active users. As you can guess, a steady upward trend suggests a healthy sales pipeline, that you’re closing deals, and you’re building customer loyalty. 

A positive ARR trend instills confidence in investors and, in a way, is a TL;DR for investors who want a quick check on the health of the SaaS business.  

2. Cash in the bank

As the name suggests, this metric is simply the cash you have in your bank account. While it’s a pretty straightforward metric, it’s crucial to understanding the stability of your business. It indicates how long you can keep the lights on and how soon you’ll need to raise a new round of funding to hit your goals.

3. Months of runway

Runway is closely related to cash in the bank. It tells your investors how many months your business can sustain its operations given its cash reserves and current burn rate. Knowing your runway will help investors assess how soon you might need to start planning your next fundraising round. 

Together, cash in the bank and runway helps VCs evaluate the health of your company. If both these metrics are in a good range, then your burn multiple becomes the second-order metric that investors will look at. 

Burn multiple measures the amount of capital you’re burning for every dollar of new ARR you’re bringing in. It describes your capital efficiency, which is an indicator of your business viability and potential ROI. 

4. ARR waterfall chart for the quarter

The ARR waterfall chart is a visual representation of your quarterly ARR changes. It breaks down the components of the ARR, telling investors:

• Where you started the quarter (starting ARR)
• What you lost to churn (churned ARR)
  
• How much of your ARR is coming from existing customers (expansion ARR)
  
• How much new ARR you gained from new customers (new ARR)
  
• Where you ended the quarter (ending ARR)
  

More importantly, the ARR waterfall can illustrate where there may be problems lurking in your business. For example, if you have too much churn, then VCs might want to dig deeper there. So, in your update, you might want to provide some context for that in the narrative of your message — was there a big account that churned, or does the number reflect a seasonality thing?

5. Gross revenue retention

Gross revenue retention (GRR) reflects what the company loses to cancellations/downgrades from its existing customer base. It’s the percentage of revenue retained from existing customers. 

The reason investors want to know your GRR is that focusing only on existing customers, it tells them how churn is impacting your revenue.

6. Net revenue retention

Net revenue retention (NRR) is the percentage of recurring revenue a SaaS company retains from its existing customers over a specified time period.  It doesn’t take into account revenue from new customers. 

NRR is an indicator of how well a SaaS company can retain its customer base and generate additional revenue from it over time. It helps a VC gauge the sustainability and scalability of the company. 

7. Gross margin

Simply put, gross margin gives a picture of the percentage of revenue left after accounting for the cost of goods sold (COGS). It is an extremely important metric because it reflects the upper limit of your company’s profitability.

8. Rule of 40

The Rule of 40 is a key indicator that assesses how well you’re balancing growth and profitability. It states that the sum of the SaaS company’s revenue growth and profit margin should be equal to or greater than 40%. If it is, your VC will know that the company is financially healthy, sustainable, and attractive for future investments. 

Additional second-order metrics and data to cater to investors’ preferences 

The eight metrics we described above give a wholesome picture of the health of your SaaS business, allowing your investors to easily ascertain the overall direction in which the company is headed.  

However, you may want to add other, second-order SaaS or business metrics and possibly certain financials to your update based on your investor's preferences. These might include your LTV: CAC ratio, CAC Payback Period, Burn Multiple, and Magic Number, among others. 

It is always prudent to talk to your investors early on in your relationship to understand what they want to see because different investors may want to see different things. So, in addition to the core list, make sure you include any others your investors may want.  

The key here is to not play musical chairs with your metrics. Once you’ve decided on the set of metrics you'll report, be consistent, reporting on the same metrics with every update you provide. 

Also, make sure you’re calculating the metrics you report the same way your investors do as, in some cases, different funds may have their own way of calculating a certain metric.  

Take advantage of the opportunity to ask for help if you need it 

Remember that your investors succeed when you succeed. It’s not only okay to ask for their help, they want you to and will go out of their way to help you when you do. 

It is important, though, to be very specific in the way you ask. Your investors don’t have time to guess what it is you’re asking for. So always be clear about what you need. 

6 tips for making your updates more engaging for investors  

Email is the most common way to share investor updates. They're easy for investors to read, and they allow you to track investor engagement with email open rates. Here are a few additional tips you can employ to improve your investor updates:

1. Personalize your communication. This is a must if you really want to engage your investors.
2. Tailor updates to individual investors' preferences to the extent possible. For example, it's not uncommon for a single SaaS metric to have more than one name. So, best to refer to the metrics investors want to see by the same names they use. This will help avoid misunderstandings and build trust.
3. Make it a short email. Spare the extra verbiage, and keep each section concise and to the point.
4. Add visuals (e.g. charts). No one wants to open an email only to find a wall of text. Visual elements not only make your email easier to read, but the also provide a lot of information, allowing you to eliminate a lot of words.
5. Create and send a video with your update, ideally with one of the founders expanding on the information it contains. Investors like to know the founders of the companies they're invested in, and a video offers a more human connection.
6. Create a template, or better yet, download ours and customize it to your heart’s content. It contains all the core elements we’ve described here and is completely customizable. The best thing is that it gives you a design that you can use to ensure the format of your email stays consistent from update to update.
   

Take your updates to the next level by making them interactive

Investors have a lot riding on your business. So, it is important to show that you care too. By that we mean, you can try to do something more than just a presentation slide deck (or a pitch deck if you're engaging with potential investors). 

How about going the extra mile by using a financial planning and analysis (FP&A) tool like Drivetrain or a BI tool to give your investors a link to a dashboard customized with the information they want to see? 

This gives them the ability to explore and play around with the data, seeing it in whatever ways matter to them. While it takes more time to develop these extra elements (though not so much if you have a tool like Drivetrain), they can be a powerful way to engage stakeholders.

Make your process for updating investors easy

The investor update is among the most important activities you do as a founder. It helps establish trust and transparency and helps you scale your business with their able guidance and mentorship. 

The value of regular communication with your funders starting from the first month of their investment cannot be stressed enough. Here are a couple of best practices to get you started off right with your first investor update.

Set up a process early on and stick with it

Make sure you routinely set aside sufficient time each quarter (or more often if you decide to send monthly investor updates) to gather and review your data, drill down into the metrics and data, if needed, to explain what's driving the numbers, and also to tell a more compelling story with your update.

Leverage technology to streamline the process

There are a number of investor relations platforms on the market that will help you  streamline your communication with your investors.  These platforms include features like real-time analytics, secure document hosting, and webcasting capabilities that help manage, track, and disseminate important financial and operational information. In some cases, you can use these platforms for regulatory compliance as well.

A modern FP&A platform can significantly streamline your process for board and investor reporting, too, by automating monthly and quarterly reports that make preparing your updates easier. Drivetrain is ideal for this and offers a host of other features that can help you take your investor communications to a whole new level, including:  

• Automatic updates that ensure the results you're reporting are always current.
• Ability to do flux analysis and budget variance analysis to better understand and explain the results you’re reporting.
• Ability to perform root cause analysis to understand why there’s a shortfall in your numbers against your targets.
• Ability to perform a what if scenario analysis to show investors how you plan to get your numbers back on track.
• Granular access controls and robust security features that ensure data privacy while giving you the freedom to share the right data with the right people. 

You can also easily create highly interactive dashboards in Drivetrain that can be shared via a link, allowing your investors to really dig in. They can change date ranges, group by various dimensions, and even do high-level analyses. And with all your charts and graphs updated with real-time data, your investors can be confident in any conclusions they draw from their exploration.

Download our free investor update template

Business is all about relationships, and in today's tight funding climate, building your relationships with current and prospective investors has never been more important. If you want to stand out, you need to level up your investor relations. Get started now by downloading our free investor update template and discover why it really is the only one you’ll ever need.